Putin prods planet into riskier post-pandemic funk

4 minute read

An armoured vehicle drives along a street, after Russian President Vladimir Putin authorized a military operation in eastern Ukraine, in the town of Armyansk, Crimea, February 24, 2022.

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LONDON, Feb 24 (Reuters Breakingviews) - Vladimir Putin has shoved the world into a dangerous new era. By initiating an all-out invasion of Ukraine, the Russian president is presenting a new challenge to a planet weakened by two years of battling Covid-19. The biggest attack on a European state since World War Two has potentially seismic consequences for Western economies and for global markets in energy, finance and technology.

The first casualty of the Russian missiles that landed on Ukrainian cities in the early hours of Thursday morning read more is the idea that sanctions can deter armed conflict. U.S. President Joe Biden has for weeks warned of penalties the West would impose on Russian banks, companies, oligarchs and even Putin himself read more following an invasion. Yet the Russian leader’s decision to press ahead, despite triggering a 30% drop in Russia’s main stock market indices, demonstrates the limits of non-military retaliation. That may embolden other countries like China to be more aggressive read more .

The leaders of the Group of Seven rich countries will now respond with punitive financial measures on top of ones already imposed read more . Yet the economic damage they can inflict on Russia is limited by American and European reluctance to disrupt the country’s energy exports. Brent crude oil prices jumped 9% to an eight-year high of $105 a barrel read more following the invasion, imposing further costs on companies and consumers grappling with rising living expenses. That further complicates the challenge facing central banks in the developed world as they attempt to rein in high inflation.

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Western leaders are also poorly positioned to demand further sacrifices of their populations. Biden leads a divided country and faces congressional elections later this year. British Prime Minister Boris Johnson is under police investigation over lockdown-busting parties at home. French President Emmanuel Macron will seek re-election in April. And while Putin’s aggression may help unify the European Union, its leaders have little experience of providing a robust response to a military threat.

The Russian invasion will also increase frictions in global markets already fractured by the pandemic. American restrictions on exports of semiconductors and other technology to Russia will impel others like China to become less dependent on Western hardware and software. European nations will accelerate the shift to alternative and more reliable sources of energy. Banks and asset managers will have to navigate an ever more complex thicket of rules and restrictions.

A century ago the world suffered a deadly outbreak of influenza after a devastating world war. This time, conflict has broken out after a global pandemic. Putin has ensured the new era will be even more precarious than it already was.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)


- Russia launched an all-out invasion of Ukraine by land, air and sea on Feb. 24, the biggest attack by one state against another in Europe since World War Two.

- Ukraine’s President Volodymyr Zelensky said Kremlin leader Vladimir Putin’s aim was to destroy his state.

- Putin declared in a televised address that he had ordered “a special military operation” to protect people.

- U.S. President Joe Biden said his prayers were with the people of Ukraine “as they suffer an unprovoked and unjustified attack” while promising tough sanctions in response. Biden was due to meet with G7 leaders on Feb. 24. European Union’s foreign affairs chief Josep Borrell also promised the toughest financial sanctions the bloc had ever imposed.

- Russian stocks plunged, with the MOEX Index down 36% by 0915 GMT on Feb. 24, while the dollar-denominated RTS Index fell 41%. Shares in Russian lenders Sberbank and VTB and energy giants Gazprom and Rosneft were all down 50% or more.

- Oil prices surged, with brent crude rising 7% to $104 a barrel, breaching the $100 level for the first time since 2014. Gold was up 2% at $1,944 an ounce.

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Editing by Rob Cox and Karen Kwok

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